Conflict Financing in Gold Supply Chains

Transcription

1 ACHIEVING RESPONSIBLE SUPPLY CHAINS STRATEGIC CSR RESPONSIBLE SOURCING OF RAW MATERIALS SUPPLY CHAIN DUE DILIGENCE Conflict Financing in Gold Supply Chains Financial Due Diligence not new for the gold supply chain NEW FOCUS = PHYSICAL FLOW OF MATERIAL WHY: Regulations + consumers & investors increasingly understanding HR risk HOW: OECD/LBMA/RJC Due Diligence = context appropriate mechanism to investigate, identify and respond to human rights issues on ongoing basis Refining Session Harrison Mitchel 1

2 What causes companies to act? Multiple Pressures up and down the supply chain Commercial, Regulation + Consumer consumers && Advocacy investors pushing companies to deep dive into Regulatory HR risks in their supply Reputational chains Investors Past Experience HR assessments externally focused. Companies need management systems for ongoing, proactive response OECD due diligence = context appropriate mechanism to investigate, identify and respond to human rights issues on ongoing basis Specific Issues to Gold Conflict financing Child and forced labour Life threatening working conditions Community specific issues AML systems that are already in place The complexity of the supply chain i.e. No. of suppliers and recycled gold Multiple standards = LBMA, RJC, WGC However, reasonable due diligence still required Refining Session Harrison Mitchel 2

3 What is Reasonable Due Diligence OECD States: Due diligence should be appropriate to your company s position in the supply chain = intelligent response based on understanding supply chain and risk analysis Investigation 5 Step Process 1. Strong Management Systems 2. Risk assessment 3. Risk mitigation 4. Conduct 3 rd party assessment of process 5. Report on activities and outcomes Where do companies start? Investigation No leadership = no objectives No integration = not sustainable Knee jerk reactions are a really bad idea that will waste time and money Refining Session Harrison Mitchel 3

4 What actions should companies take? Set up the leadership team and objectives Map the supply chain and identify human rights impacts & risks Rationalise and prioritise issues based on impact Identify areas for leverage Set up the internal systems to be able to sustain the process in an ongoing, proactive and reactive manner Example: Company operating in Central Africa IDENTIFICATION: Heidelberg Conflict Barometer Commercial pressures = DRC + 9 countries CONSISTENT INTERNAL STRATEGY: Company policy consistent with the OECD DDG that targeted conflict/hr/child labour risks + communicating expectations to suppliers PIGGYBACK ON EXISTING COMPANY APPROACHES: Enhanced KYC process to check background of ALL new 3TG suppliers LOCAL CERTIFICATION: Only sourcing certified material from CFSI approved programs INDEPENDENT ASSESSMENTS: Own risk based annual independent assessments on a % basis, ongoing monitoring Better communication with suppliers 8 Refining Session Harrison Mitchel 4

5 Then what? This is not an activity with a perfect outcome, rather your focus should be on ensuring a robust process conforming to OECD Transition in mind set from one off assessment to ongoing, proactive and reactive due diligence An audit is an essential feedback mechanism when setting up the system, but its not a solution in and of itself Effective supplier engagement is key to any successful intervention in the supply chain Lack of understanding, capacity and interest Don t do it alone support industry initiatives, get stakeholder feedback, independent assessments Refining Session Harrison Mitchel 5